What you should know about becoming debt free

Debt settlement offers a better alternative to consolidation loans, credit counselling, bankruptcy or avoidance.  By using debt settlement to reconcile debt, consumers can easily improve their debt-to-income ratio and have more control over the process of becoming debt free.

In fact, about 60 percent of your credit score is calculated based on debt-to-income ratio, while payment history accounts for only 40 percent of your score. Therefore, lowering your debt or becoming debt free utilizing debt settlement, also known as debt negotiation makes sense.

More often than not, consumers who turn to debt settlement are, good people who are unable, rather than unwilling, to pay their debts due to financial hardship.  Job loss, divorce or health problems have made it virturally impossible to pay off debt. 

The US economic downturn has compounded the problem and resulted in record consumer debt of 2.6 trillion dollars.  Even more troubling, consumers have fallen behind on credit card debt, personal loans and other unsecured debt at a record breaking pace—the highest since the American Banking Association began tracking the data in 1974. 

As consumer debt reaches crisis proportions, the number of consumer debt programs has more than doubled—to over 2,000—spawning a surge in fly-by-night credit counseling, debt settlement and debt consolidation companies. 

Beware of Scams

Although there are many legitimate companies offering debt settlement, debt relief and credit counseling services claiming to help you get out of debt, the Federal Trade Commission (FTC), Congress and States' attorneys are beginning to take a hard look at companies more interested in helping themselves than helping their clients get out of debt.

Make certain you choose the right solution for your situation to help you get out of debt.  In fact, a "professional" debt negotiator or debt settlement company may do you more harm than good as cited in a recent New York Times article:

·     Debt consolidation - Requires that you apply for another loan or debt consolidation loan.  Nearly impossible if you have bad credit.  The loan may have to be collateralized by use of the equity in your home, thereby taking your unsecured debt and turning it into high-risk secured debt.  Debt consolidators already have a pre-arranged agreement with the consumer's creditors to help recover their own losses.  Not a smart move and there is a good chance you could be forced into bankruptcy or worse.  Unlike debt settlement, debt consolidation will reduce your monthly payment with a lower interest rate, however you will have to pay off the entire balance on your way to becoming debt free.  Common sense tells us not to go into debt to get out of debt.

·     Credit counseling - Non-profit does not always mean safe.  Nearly every ad your see, hear or read are "non-profit organizations."  Indeed they may be, however, most of these firms are funded in part by the very credit card companies and banks you're indebted to.  If, and only if you meet your creditor's requirements, the "counselor" will get you a lower interest rate in most cases, but you will have to pay back the entire balance you owe.  If you miss a payment, you may get removed from their program. These companies require that you set up a reduced and strict payment plan with your credit card company, while they collect a large up-front fee from you and a monthly maintenance fee, all while collecting a fee from your credit card company. You might as well file for bankruptcy because credit counseling will be reported as bad credit.  75% of all people in credit counseling do not successfully complete the program.

·     Bankruptcy - Recent reforms in US bankruptcy laws have made it more difficult for consumers to declare bankruptcy.  In April 2005, Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) decreasing eligibility for people to file Chapter 7 bankruptcy, the most popular form of bankruptcy. Just like many other debt relief programs, you have to qualify for bankruptcy.  If you do qualify, bankruptcy requires that you appear in court and will be a matter of public record.  Bankruptcy will ruin your credit and stay on your credit report for up to 10 years.  This should be a last resort option.

Reduce your debt up to 70%!

·     Debt Settlement - If cutting your unsecured debt by more than half appeals to you, then debt settlement is your best option.  Pay off debts in months rather than years.  When you choose debt settlement, you can look forward to paying off your debts in 48 months or less and for pennies on the dollar.  Mortgages, auto loans and other types of collateralized (secured) debt cannot be renegotiated.  Credit card, department store cards, gas cards, some personal loans and medical bills are unsecured and can be renegotiated.   

"If you want something done right, do it yourself"--Unknown 

Whom can you really trust?

For most people, the prevailing mindset is that they need to hire a professional to negotiate their debts.  Quite the contrary!  There is no secret formula to negotiating your debts.  Who better to negotiate than (you) the debtor?  Consumers looking for a solution are motivated to pay off debt.  Ask yourself, does a so called "professional" know more than you about your debts?  The professional negotiator is simply an individual that has negotiation skills.   If you have ever negotiated or "haggled" the price of an item or terms of anything, you can negotiate a debt settlement.  More importantly, in today's economy, cash starved banks and credit card companies are making settling easier than ever and are eager to settle delinquent accounts in some instances,  as low as 30% of the balance owed!

The Stop Debt America Debt-Free Solution

Pay off debt without going into debt.  Download Stop Debt America's do-it-yourself, step-by-step debt settlement manual for just $9.95.  Your instant download will begin immediately. 

Work at your own pace.  Negotiate your own terms instead of leaving it up to a stranger.  Settle your debts with confidence and the guidance of the debt settlement manual.  Written by financial planners and consultants with over 25 years experience in debt negotiation, the authors have used the very same techniques found in Stop Debt America's Debt Free Solution to settle debt for clients from throughout the US.